Mumbai: Gold premiums in the grey market that rose after 8 November when the government withdrew high-value currency notes have since fallen, as fears abound that the Income Tax (I-T) department will tighten its noose around the jewellers, dealers and analysts said.

Immediately after the demonetisation announcement, the price per 10 gram of gold rose up to Rs48,000 in Mumbai’s grey market, compared with the usual market rate of around Rs30,000, as many scrambled to convert their black money to safe haven assets, two bullion dealers, who refused to be identified, said, citing the sensitivity of the issue.

However, prices in grey market have since tumbled to Rs 37,000 per 10 gram over fears that the jewellers may not be able to strike these lucrative deals without inviting I-T department’s attention, the Mumbai-based dealer said.

“The deals took place at strikingly high levels immediately after the demonetisation announcement. Gold was going at a huge premium in the grey market. The gap has, however, narrowed as people are fearing incurring the wrath of the I-T department ,” said Kishor Narne, associate director, ‎Motilal Oswal Commodities Broker Pvt Ltd.

Separately, spot gold closed at Rs29,391 per 10 gram on MCX at 5pm on Wednesday—2.97% below its 8 November close of Rs30,292 when Prime Minister Narendra Modi announced scrapping of Rs500 and Rs1,000 currency notes. Internationally, gold prices were trading at $1,211.32 an ounce in New York when Indian markets closed on Wednesday—down 5.5% from $1,281.88 an ounce before 8 November.

On 10 November, the I-T department conducted raids in Delhi, Mumbai and other major Indian cities amid reports that tax evaders were engaging in illegal transactions to dispose off their unaccounted wealth.

Buying gold from jewellers in cash without providing a permanent account number (PAN), backdated bills for high-value purchases and money launderers accepting old Rs500 and Rs1,000 currency notes for a hefty commission and foreign exchange conversions at a premium were some of the prominent trends reported after the demonetisation kicked in.

Excise officials have sought details on the sale of the precious yellow metal and ornaments from over 600 jewellers across 25 cities, PTI reported on 11 November.

Officials of Directorate General of Central Excise Intelligence (DGCEI), an intelligence arm under the finance ministry, has sent notices to these jewellers seeking details of the gold sales in the past four days, beginning 7 November, PTI said, citing people with knowledge of the matter.

The jewellers have been asked to give details like quantity of stock held by them and sales made during these days.